TDS Provision is applicable only when payment is made in ‘monetary terms’

Brief of the Case

In CIT vs. Bruhat Bangalore Mahanagar Palike, the Karnataka High Court on the issue of applicability of TDS provision held that section 194LA only applies to compulsory acquisition of land and not on voluntary acquisition. Further, the concept of tax deduction at source and depositing the same with the Revenue is where payment is made by cash, cheque, demand draft or any other similar mode. When there is neither the quantification of the sum payable in terms of money nor any actual payment is made in monetary terms, it would not be fair to burden a person with the obligation of deducting tax at source and exposing him to the consequence of such default.

Fact of the Case

Bruhath Bengaluru Mahanagara Palike [‘BBMP’] for discharging of its functions related to expansion of existing roads and construction of underpasses, etc. acquire lands either by compulsory acquisition of lands under the provisions of Land Acquisition Act, 1894 or any such other Act relating to compulsory acquisition of land or take land under Section 14B of the Karnataka Town and Country Planning Act, 1961 [‘KTCP Act’], where the land owner may voluntarily surrender his land free of cost and handover possession of such lands and in lieu thereof, Certificate of Development Rights [‘CDR’] were issued by the Authority in the form of additional floor area equal to 1½ times of area of land surrendered. In the present case also the land was taken under Section 14B of KTCP Act and not by way of any compulsory acquisition. As such, there was no cash transaction or payment made by BBMP to the land owner. Assessing officer, however, invoking the provision of section 194LA treated the respondent as ‘assessee-in-default’ for not deducting and depositing the required tax as per the provision and consequently, after quantifying the amount of value of land so surrendered by the land owner in favour of BBMP, directed that TDS at the rate of 10% under Section 194LA amounting to `2,41,91,128/- was to be deposited by the assessee. Appeal filed by the respondent-BBMP was dismissed by the CIT(A) which was challenged before the Tribunal and by a detailed and reasoned order, the tribunal allowed the appeal. Aggrieved by the same, Revenue has filed appeal before the Hon’ble High Court.

Substantial Question of Law

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